Categories: Accounting WAEC

The profit or loss on disposal of the machine was?

Use the following information to answer the question below

Kako Ltd bought a machine for D 1,200,000 on 1st January 2018. Depreciation was provided annually at a rate of 10% using the diminishing balance method. The machine was sold for D 880,000 on 31st December 2021.

 

A. D 280,000 profit
B. D 87,480 loss
C. D 320,000 loss
D. D 92,680 profit

Correct Answer:

Option B = D 87,480 loss

Explanation

From 2018 to 2021( accounting year) is three (3) years

D
Cost 1200000
Year 1 ( 10% x 1200000) 120000
1080000
Year 2 ( 10% x 1080000) 108000
972000
Year 3 ( 10% x 972000) 97200
Depreciation 874800
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